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Will RBI keep status quo on rates?
Wed, 15 Jan Pre-Open

The fluctuations in vegetable prices are something that mostly housewives and the common man are bothered about. However, the issue assumed different proportions recently. The increase in vegetable prices, which was the main culprit behind consumer price inflation (CPI) numbers, was a major cause of concern for the policymakers. Fuelled by high food prices, CPI based inflation touched record high of 11.6% in the month of November causing people to expect a rate hike despite the slowdown in the economy.

However, policymakers must have got a breather with the issue of CPI numbers for December 2013. For urban areas; the CPI number for December is back in single digit. For rural areas as well, the data suggests some cooling in the inflation levels. The moderation in food prices is a major reason behind the decline in CPI numbers.

Now that food prices seem to be softening thus bringing down overall inflation levels, it is expected that Reserve Bank of India will keep the policy rates unchanged in the upcoming review on January 28, 2014. At a time when industrial production has slowed down and the economy is growing at the slowest rate in the decade, easing inflation is expected to make life easy for policymakers and the Government ahead of elections. However, what is ironical about the whole issue is that food prices have become a headache in a nation which is one of the biggest food producers in the world. While things look better now, we still stand vulnerable to high inflation. Thus, whether the data for December signals the beginning of a fall in CPI in the coming months remains to be seen.

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